Monday, Aug 24, 2015

BTTL is sooooo topas

Introducer Today: Buy to Letters selling up to escape tax clampdown

Taxes up. What more needs to be said?

Posted by killer bunny @ 09:28 AM (5590 views)
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7 Comments

1. reticent said...

"A report in The Daily Telegraph said some landlords are already paying 100% of their profits in tax and the changes could increase that to 150%. They are beginning to sell up as a result."

Sums up why modern journalism is so rubbish: everyone is rushing around to put out content with no time to even read the articles that they're ripping off properly.

The Telegraph article said nothing of the sort. In any case, under the old tax regime, a landlord would have to be a complete idiot to have been to be paying 100% of their profits in tax, since the maximum tax rate was 45%, mortgage interest (their main cost) and all other expenses were deductible, plus they got 10% revenue tax-free just to compensate them for wear and tear.

Monday, August 24, 2015 11:29AM Report Comment
 

2. sneaker said...

Hang on, I thought UK property (and especially London property) was supposed to go up for ever?

Just like USA property?

And Tokyo property?

Tuesday, August 25, 2015 06:11PM Report Comment
 

3. jack c said...

@ sneaker - you forgot to mention Enfield property !

Wednesday, August 26, 2015 07:52AM Report Comment
 

4. libertas said...

Notice though that the tax DOES NOT effect those with little leverage. Those cashing in their pensions, the new comers, will be barely affected.

You also forget the opportunity costs. When investors sell up THEY PAY CAPITAL GAINS TAX.

So there will be major inertia to this. Many investors may well decide to stay tight, because unless they are on interest only mortgages, they will slowly claw their way to decent multiples, anticipating rent increases to help fund that, and then they are Scott free.

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Regarding Enfield, I am looking forward to sharing the next Land Registry report. Property that sold for 300k here in May is selling like hot cakes at 400k.

Wednesday, August 26, 2015 12:31PM Report Comment
 

5. reticent said...

@4

Notice though that it does affect the huge numbers of people buying BTL properties with mortgages (about 100k/year last time I checked). It is precisely the newcomers who will be affected. Anyone who has held a property for 5 years will probably have seen rent increases that leave their mortgage costs as a smaller percentage of their revenue.

You seem to be forgetting the opportunity cost. A certain proportion of BTL landlords will find these changes leave them paying money to hold onto property. That will be the opportunity cost they consider first and foremost.

If a lot of people are in that position, there will be a flood of new chains forming. There will be a lot of downward pressure on prices. Paying CGT on any profit will be the least of their worries.

You have a point, though. The best way to do BTL is to amass a portfolio over decades by continually reinvesting profits, until you have enough equity across the portfolio to own a few outright. Say, you buy 1 at 100k, another at 130k, another at 150k... etc. At some point you stop buying and just let them appreciate. Then you sell some off to deleverage in a way that minimises CGT (selling the most recently bought ones or else move into them for 6 months before selling). Tell the agents to manage them. After that, it's all profit and you can retire.

Finding out you have to sell one or all of them, ahead of time because you took on too much leverage shortly before a change in regulations is not part of the gameplan, nor is budgeting the tax for that because you never expected to sell anytime soon when you reinvested your profits.

That doesn't mean they won't be forced to sell though. It just means they'll be hit really hard when they do.

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LITERALLY NO ONE ELSE IN THE WHOLE WORLD IS LOOKING FORWARD TO THAT.

Wednesday, August 26, 2015 02:48PM Report Comment
 

6. mister ed said...

@4
"Regarding Enfield, I am looking forward to sharing the next Land Registry report. Property that sold for 300k here in May is selling like hot cakes at 400k."

If bragging about your house price is all you have in life, you need to get out a bit more. :-)

C'mon Libby, open some tinnies, switch on the soul music, and get with the beat. You might even try a bit of the other. That might help you get some perspective on life.

Wednesday, August 26, 2015 08:08PM Report Comment
 

7. mister ed said...

@4

Oh, and the schools in Enfield are still dire.

Wednesday, August 26, 2015 08:20PM Report Comment
 

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